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FD Full Form & Meaning: All You Need to Know

If you are familiar with banking terms, you might have heard of the term FD or Fixed Deposit. FDs are one of the most popular investment options among people who want to earn a fixed return on their savings. In this article, we will discuss what FD full form is, its meaning, how it works, its benefits, and more. So, let’s get started!

What is FD?

Fixed Deposit or FD is a financial instrument that allows you to deposit your money with a bank or financial institution for a fixed period of time, ranging from 7 days to 10 years. The interest rate offered on FDs is fixed and is generally higher than the interest rate on savings accounts.

Full Form of FD

FD stands for Fixed Deposit.

Types of FD

There are different types of FDs available in the market, including:

  • Regular Fixed Deposit
  • Flexi Fixed Deposit
  • Tax-Saving Fixed Deposit
  • Senior Citizen Fixed Deposit
  • NRI Fixed Deposit
  • Company Fixed Deposit

How FD Works

When you open an FD account, you deposit a lump sum amount for a fixed period of time. The interest rate is fixed for the entire tenure, and you earn interest on the deposited amount.

At the end of the tenure, you can withdraw the principal amount along with the interest earned. You can also choose to reinvest the amount for another fixed period.

Advantages of FD

FDs offer several benefits, including:

  • Guaranteed returns
  • Higher interest rates compared to savings accounts
  • Low risk investment
  • Flexible tenures
  • Easy to open and manage

Disadvantages of FD

FDs also have some drawbacks, such as:

  • Lower liquidity
  • Fixed interest rate
  • Penalty for premature withdrawal
  • Inflation risk

Taxation on FD

The interest earned on FDs is taxable as per the income tax slab of the depositor. TDS or Tax Deducted at Source is also applicable on interest earned on FDs.

FD vs. Savings Account

FDs offer higher interest rates than savings accounts, but they also have a fixed tenure and penalty for premature withdrawal. Savings accounts offer liquidity and flexibility, but the interest rates are lower.

FD vs. Mutual Funds

FDs are low-risk investment options with fixed returns, while mutual funds offer higher returns but are subject to market risks. FDs are suitable for risk-averse investors, while mutual funds are suitable for investors with a higher risk appetite.

Tips to Choose the Best FD Scheme

Here are some tips to help you choose the best FD scheme:

  • Check the interest rates offered by different banks and financial institutions
  • Choose a tenure that matches your investment goals
  • Compare the penalties for premature withdrawal
  • Check the credit rating of the bank or institution

FD Interest Rates

FD interest rates vary from bank to bank and depend on the tenure and deposit amount. Generally, the longer the tenure and higher the deposit amount, the higher the interest rate.

FD Calculator

You can use an FD calculator to calculate the interest earned on your FD. You need to enter the deposit amount, tenure, and interest rate to get the maturity value.

How to Open an FD Account

To open an FD account, you need to follow the below steps:

  1. Choose a bank or financial institution: You can choose a bank or financial institution that offers FD accounts.
  2. Fill the application form: You need to fill the application form with the required details like name, address, PAN number, etc.
  3. Choose the tenure and deposit amount: You need to choose the tenure and deposit amount as per your investment goals.
  4. Submit the required documents: You need to submit the required documents like ID proof, address proof, PAN card, etc.
  5. Make the deposit: You need to make the deposit either through online or offline mode.
  6. Receive the receipt: Once you make the deposit, you will receive a receipt with the details of the FD account.

FAQs on Fixed Deposit

What is the minimum deposit amount for FD?

The minimum deposit amount for FD varies from bank to bank, but it is generally Rs. 1,000.

Can I withdraw my FD before maturity?

Yes, you can withdraw your FD before maturity, but you will have to pay a penalty.

What is the maximum tenure for FD?

The maximum tenure for FD is generally 10 years.

Is the interest earned on FD taxable?

Yes, the interest earned on FD is taxable as per the income tax slab of the depositor.

Can I get a loan against my FD?

Yes, you can get a loan against your FD, and the interest rate is generally lower than other types of loans.

Conclusion

In conclusion, FDs are a popular investment option for people who want to earn a fixed return on their savings. They offer guaranteed returns, flexible tenures, and low-risk investment.

However, they also have some drawbacks like lower liquidity and inflation risk. It is important to choose the best FD scheme that matches your investment goals and compare the interest rates offered by different banks and financial institutions.

By following the above tips and understanding the details of FDs, you can make a wise investment decision.

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Vishal Jhaveri
Vishal Jhaverihttps://www.wealthpedia.in
Vishal Jhaveri is an experienced finance blogger with expertise in financial markets such as Stocks, Mutual Funds, Insurance, and Personal Finance. He stresses the importance of acquiring financial knowledge, a subject not typically taught in schools, to create genuine wealth and ensure a stable life for oneself and one's family. It is vital to note that all content on his website is solely for educational and informational purposes and should not be interpreted as trade or investment advice.
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